Page 317 - Ord 866 Adopting a revised Fiscal Year 17-18 and new proposed Fiscal Year 18-19 budget

Section 10 Capital Improvement Plan
CIP Impact to Operating Budget

CIP IMPACT TO THE OPERATING BUDGET

The Town of Westlake’ s operating budget is directly affected by the Capital Improvement
Program ( CIP) budget. CIP projects can often increase or decrease costs. CIP investments in
technology or significant improvements to existing maintenance intensive assets can reduce
operating budget costs. However, new facilities and land acquisitions typically increase
operating expenditures.

Operating costs are carefully considered in deciding which projects move forward in the CIP
budget. It is typically impossible to absorb many large increases in operating costs at once;
therefore, projects are programmed to prevent shocks to operating budgets. Several projects are
currently included in the Adopted CIP, and could have future impacts on the operating budget.

OVERVIEW
The Capital Improvement Program ( CIP) guides new construction and improvements to the
Town’ s infrastructure and facilities, ranging from road expansion to repairs on publicly owned
buildings, to acquisition of new water sources.

The CIP requires a sound operating budget and a solid financial base to allow for debt or cash
financing of capital projects. A well prepared operating budget assists in raising or maintaining
the bond rating of the Town. A higher bond rating means that the Town pays a lower interest rate
for the bonds sold to finance capital projects. The annual budget process takes into account
requirements of funding infrastructure, maintenance, and related operational costs.

REVENUE SOURCES AND PROJECTIONS
Development of the CIP has two phases.
1. The first phase is revenue projections. Like revenue projections for the operating budget,
trends are studied, and performance assumptions are generated. From these
assumptions, expenditure estimates are developed. Since the CIP involves long term
planning, revenue projections must be made further into the future than those required for
the operating budget. Components of revenue funding for the CIP are:
o Sales tax revenue
o Interest earnings on the fund balance and current revenues contribute to CIP
o Transfers from other funds, such as the General Fund are considered in revenue
estimating.
o Other parts of CIP financing are budgeted as debt service in proprietary funds.

2. The second phase is existing debt service obligations. Existing debt is considered when
estimating the additional amount of debt that can be assumed under the Town’ s policy.

After the new debt for proposed projects is calculated and all revenue sources are identified,
projects are prioritized and funds are allocated for long range planning. The revenues and debt
service expenditures are managed through the two Debt Service Funds of the Town.

PROJECT REVIEW
The second phase of developing the CIP involves the project requests. Through a series of
meetings, project plans are developed, studied and ranked according to criteria set forth by the
Town Council. Projects proposed for the CIP are reviewed, evaluated, and recommended under
the following guidelines:

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